Electric Heat Cost vs Oil Heat, Gas or Propane Cost

One of the interesting things that's come up lately with house shopping is comparing heating systems. After all, everybody knows that electric heat costs a fortune vs oil, natural gas or propane, but as usual, everybody is operating on obsolete information. While electric heat does still cost somewhat more than burning fossil fuel in the basement, the break even point is getting closer, and has already been reached in countries where the tax burden on oil is higher.

The basic unit of heating is the BTU, British Thermal Unit. Home heating oil gives 138,000 BTU/gal, Natural gas around 1000 BTU/cubic foot and propane around 91,000 BTU/gal. Electricity use is measured in KWh, where 1 KWh is equivalent to 3413 BTU. You can assume that electric heating is around 100% efficient, in that the electricity is converted to heat within the heating device, say an oil filled electric radiator. That's not to say that generating electricity is always efficient, but it happens on the other side of the meter, along with the transmission losses. The Kilowatt hours you pay for are all on your side of the meter, where the heating you generate from them is around 100% efficient.

Most existing homes still have lower efficiency heating units, estimate around 75% for oil or 70% for natural gas or propane. The losses include heat going up the chimney as result of the combustion process, and inefficiency in the thermal transfer to a medium fluid, like hot water or steam, and the lack of heat recovery from that fluid. The Dept of Energy has a nice guide explaining the differences between the worst heating systems, down around 50% efficient, and the newest high efficiency furnaces, between 90% and 95%.

Just to keep the math simple, lets pretend that all heating systems are 100% efficient, so we're only dealing with the fuel cost. Keep in mind that ignores not only the true efficiency of the heating systems, but also the cost of the system. Furnace and fluid transfer systems are expensive to install and maintain vs simply putting electric radiators in every room with independent thermostats right on the radiator, which is equivalent in some ways to an expensive multi-zoned central heating system.

The bottom line where I currently live and electricity costs about 19 cents per KWh is that $1.00 of electric bill buys about 18,000 BTU. That means that the break even point on electric vs oil heating cost (fuel only) comes when home heating oil reaches $7.67/gal. But in a real world situation, if you have an old oil system running at 70% efficiency, the break even point is $5.37/gal which we might reach this winter. And if you have one of the ancient oil furnaces running down around 50% efficiency, the break even is $3.83/gal for oil, which we've already passed.

Natural gas sells by a unit known as the therm, where 1 therm = 100,000 BTU. That means that the break even with electricity at $0.19/KWh comes when 1 therm costs around $5.56. That's a long way off for most US homeowners, which also goes to point out that natural gas is currently a much cheaper alternative than oil for home heating. If you have an incredibly inefficient old gas furnace, like a coal conversion (I saw one of these in a house a few weeks ago) the break even would be down around $2.78/therm, which is still a ways off.

The break even with electricity at $0.19/KWh for propane at 100% efficiency comes when propane costs $5.06/gal. This is close to happening already in the US, and if you have an older propane burner, the break even cost may already have been reached. But keep in mind this only refers to metered electricity coming off the grid. If you're running a generator to generate electricity, heating with electricity would be like burning piles of dollar to keep warm. On the other hand, if you have a nice solar electric array or a windmill, electric heat is a great way to siphon off the excess without having to store it. If you pay more for electricity, the break even point is higher, but if you pay less, If you're only paying 9.5 cents per KWh delivered, you can divide all of the break even points above in half.

Note that the U.S. average cost for electricity in Jan 2008 was 10.2 cents/KWh, or $0.102/KWh. At those prices a dollar of electricity buys 33,450 BTU. That means the break even with the imaginary 100% efficient oil comes at $4.13/gal (already there) and if you have an old oil heating system, you're deep in the hole vs electricity. The 100% efficient natural gas break even is at $2.99/therm and the break even with propane cost is at $2.72/gal. Assume 70% efficiency for middle of the road, older systems, and the break even is $2.09/therm natural gas and $1.90/gal propane.

Wow, I'm going to have to check my math for mistakes!